The Minefield of Timeshares…..
Timeshares can be a fun thing. However, when you’re done with them, timeshares can be a nightmare.
The number one problem with timeshares is getting rid of them.
Ah, the exotic locations are quite alluring at first. People pay usually more than $10,000 to get their foot in the door for an annual weekly stay at some great location. Even the yearly maintenance fee is usually not a chore for the first few years.
Then, the kids grow up, or you get tired of the same location every year, or maybe money is tight and you’d rather not spend the maintenance fee for a place you’re tired of. A decision is made to sell it.
Get in line. Oftentimes there are scores of people ahead of you looking to get rid of their timeshare at the same resort location.** They usually don’t sell quickly, if at all.
Case-in-point: My phone rang a few weeks ago. New clients had been trying to sell their Mexico timeshare in a very desirable location and well known resort for a few years. They would have been happy to take half of what they paid for the timeshare ten years ago. They got their money’s worth by staying there for years and mainly wanted to get out from the annual financial obligation. Alas, no offers of any kind were coming their way.
Viola! Out of the blue they receiv an offer to purchase their timeshare from a company that specializes in foreign timeshare resales. They had a buyer who was will to pay (are you ready for this?) more than twice what they paid for this ten years ago.
Red flags immediately went up with these smart folks. Timeshares rarely, if ever, appreciate in value. At best, they may be worth what they paid for it years back. At worst, you almost have to give them away.
So, I got involved to smoke out any irregularities. Often, people are so desperate to get out from under a timeshare that they are willing to pay a resale broker money up front with the hope that a legitimate closing will result. Many times, it is a scam and people are out thousands of dollars when they are willing to let desire outweigh risk.
However, this timeshare resale broker had a unique pitch. “Absolutely no money up front to us! Your client will sign an Agreement of Intent, we’ll wire the funds directly to you. When you have your money, your clients will sign over the fractional deed. Then, and only then, are we entitled to our commission of 5%.”
Really? Hmm. I read the contracts and everything seemed acceptable, professionally written and straight forward.
After the Timeshare Resale Agreement was signed, notarized and faxed we awaited the funds cautiously optimistic that this company isn’t attempting to engage in a fraud with a lawyer involved. Could they be that bold?
Almost immediately we were then e-mailed a form: “Declaracion General de Pago de Derechos”. It was all in Spanish on an official looking “SAT” form from Mexico. $3,808 was listed in the margins.
What the what?
After requesting clarification from our US based resale broker, we received a letter with the following sentence: “As per the Mexican SAT laws, the Federal taxes in the amount of $3,808 USD must be paid before the escrow will be released on your membership.”
Aha! What a plan! The modus operandi of this scam was to build legitimacy with clients determined to get rid of their timeshares with the promise of “no money up front”. Then, when trust was built, here comes the bill for taxes that must be paid first. When questioned about this, the response was “the money isn’t coming to us, it’s going to Mexico and it’s 100% refundable!” Many have fallen for this, again, hoping against hope that this seemingly honest company isn’t getting the money, it’s the Mexican government and “I’ll get it back anyway”.
Fat chance. A cursory internet search reveals that this is a scam widely known to many State Attorney General Offices. A US based company has some deal with a Mexican company to receive the “taxes” and they somehow split the proceeds. However, rest assured, there are no funds coming to the Seller and no closing will ever take place.
Despite my clients’ disappointment, they weren’t out any money, just some time. And they were more than happy to file a complaint with the Texas Attorney General’s Office to bring this Company to the attention of the authorities.
Sometimes it’s not only “buyer beware”, but seller beware as well.
**There are many fractional interest organizations that are quite successful and their clientele are also quite satisfied. Many also allow the swapping of points so the user can have a different location of vacation spot every year.